21 October 2015

WHEN Abdirashid Duale, the chief executive of Dahabshiil, Africa’s largest money-transfer business, visits Hargeisa, the capital of Somaliland, a breakaway province of Somalia, he cannot walk down the street easily. It is not that his security is under threat. It is that with every step, another businessman stops to greet him. Strolling from the new offices of Dahabshiil’s bank to the headquarters of its money-transfer operation, a distance of perhaps a couple of hundred metres, takes the best part of half an hour.

On arrival, it becomes clear why. In Hargeisa, Dahabshiil, which means “gold smelter” in Somali, is the local economy’s nerve centre. In its money-transfer hub, huge amounts trade over the counter; at one point, your correspondent is handed $200,000 in cash to hold.

Out of this bustling business, Mr Duale’s family have built an operation that operates throughout Somalia, and well beyond. Dahabshiil’s money-transfer business now stretches across 126 countries; as well as the one in Hargeisa, the firm has offices in Dubai, Djibouti and London. It transfers money from places such as Rwanda and South Sudan.In its new bank, every floor is air-conditioned—this in a state where electricity is generated by diesel and costs roughly ten times what it does in the West. Every street trader proudly displays his Dahab account number—the mobile-money arm of the firm’s telecoms network. At least half of Somaliland’s annual income flows through the firm, reckons Mr Duale.

The company can also count on the support of powerful politicians, including David Cameron, Britain’s prime minister—who spoke up for the firm when Barclays closed its bank account in 2013. Its success in moving money has helped to rebuild shattered parts of Somalia. It is now trying to become something bigger: a bank.

Dahabshiil was founded by Mr Duale’s father, who was a trader, importing goods into Somalia from Yemen. To acquire foreign currency, access to which was then strictly controlled by Somalia’s nationalised banking system, he turned to Somali migrant workers in the Gulf who needed to repatriate their earnings. Their money paid for imports in Yemen; in turn, out of his revenues from sales in Somalia, the senior Mr Duale was able to pay money to their relatives.

In the late 1980s, when Siad Barre, Somalia’s military dictator, began bombing Hargeisa, the business, like the city, was all but destroyed. “We lost everything. We went back to a nomadic way of life,” says the junior Mr Duale. The family ended up in a refugee camp in Ethiopia. But adversity provided an opportunity. Stuck in camps, penniless refugees needed a way to get help from relatives abroad. And so business restarted.

After 1991, when the fighting died down, Dahabshiil began expanding back into Somalia. The business was crude—transactions were communicated with high-frequency radio sets and the firm relied entirely on its staff’s knowledge to ensure money reached the right people. But it quickly expanded. Satellite links were added, then mobile phones took off. Now, it is possible for someone in London to send money to a relative in Somalia with just a name and a mobile-phone number.

At one point this informality could have killed the business. After the September 11th attacks in New York, regulators in Western countries began to worry about how money-transfer systems were spiriting vast sums around the world anonymously—including to terrorists. Strict new rules about identifying senders and recipients were drawn up. Firms operating in Somalia, a lawless country, were particularly threatened. But instead of failing, Dahabshiil found a way to comply with the rules.

Since most Somalis do not own passports (which are in any case far from secure as proofs of identity), Dahabshiil relies on the strength of the clan network. In a country where men can recite their ancestors’ names back fifteen generations, references are an effective way to prove that new customers are who they say they are. After that, their biometric information and fingerprints are stored in a Dahabshiil database, so that later transactions can be verified. Many financial transactions are filmed, in case records are needed later.

This system has fended off bureaucrats determined to believe the worst about the firm and about Somalia, says Mr Duale. But it has not completely warded off controversy. Barclays closed Dahabshiil’s London account in 2013 largely because of worries about its reputation. The British bank did not want to risk being associated with car bombs and warfare in Somalia. After an outcry, and a court case, the two firms reached a settlement—but Barclays did not reopen the account. Mr Duale is now coy about how the firm banks in the West, refusing to reveal the identity of his partners.

The Lagos Deep Offshore Logistics Base (LADOL) is a 100-hectare free zone and logistics hub for multinational industrial and offshore enterprises. It is located at the entrance to Lagos Harbour and accommodates a range of foreign and local companies such as Shell, Total, Samsung Heavy Industries, Dorman Long and Fortune Global. Construction on the base started in 2001 and development is still ongoing.

How we made it in Africa talks to Dr Amy Jadesimi, LADOL’s managing director, about setting up the hub in Nigeria and the potential for similar free zones in West Africa. Below is the edited extract of the interview.

Tell us about LADOL and its development.

The free zones in Nigeria are quite similar to those in Dubai 15 years ago. Dubai started its free zones with bare land and had different zones to focus on different sectors. Similarly LADOL has been built from scratch. It is a 100% private development, and we focus on high-value industrial projects, where the inputs or outputs – or the process – is expensive. These are generally projects that value at hundreds of millions of dollars and, because the projects are either so valuable or so difficult to do, they typically haven’t been done in Africa before. We focus on that end of the market because we know that if we can create an environment where those projects can be done in Nigeria, it will have a huge multiplier effect.

An example of one such development is our shipyard. We built a US$300m shipyard, and that is the largest vessel integration yard in West Africa. Right now we are involved in a project where we are building a $3.8bn offshore oil and gas vessel, and that is going to enable, for the first time in Nigeria’s history, a vessel of this kind to be birthed onshore in Nigeria. This means that instead of the entire project being centred around an offshore location – either in America or more recently in South Korea – all of the work can now be done in Nigeria.

What is the impact of this?

In real terms this means that if you’re fabricating something that needs to go onto this vessel, before LADOL built this facility you would have had to put whatever it was you are fabricating – and these are massive structures, weighing like a 1,000 tonnes – on a ship and send it to South Korea to be made part of something else. And clearly the economics of that don’t make sense. So because it was so difficult and so expensive, people didn’t fabricate in Nigeria. It just wasn’t worth it. Now, because we have this facility at LADOL, we have created a space where you can do this fabrication in country and it is economically viable because you don’t have to ship the fabricated pieces to the other side of the world – everything stays in country. So the local demand for fabrication is going up four times and we are creating 50,000 jobs directly and indirectly because there is a 10x multiplier effect.

By building this all-in-one industrial village, we are able to give people the sort of specialised infrastructure, equipment and trained personnel they need, all in one location. And we are able to do these massive projects in Nigeria instead of doing them outside of the country, which obviously has tremendous benefits for Nigeria.

But clearly building this kind of infrastructure and setting up this kind of operation takes a long time… We’ve been building the facility now for almost 15 years. We have invested $500m and the investment is still continuing.

Other than skilled labour and manufacturing facilities, what are some of the infrastructural and operational benefits of LADOL’s industrial village?

The town has been built with infrastructure which is tailored towards heavy industrial activity. So the roads can carry a much heavier load, and the equipment, buildings, and everything is built with a very high level of structural integrity. We have very heavy cranes, which aren’t available elsewhere in the country. And because we focused exclusively on this high-value industrial end of the market, throughout the whole village the health and safety standards, as well as the security standards, are also very high. So if you’re a foreign company coming into this environment, you will literally be able to land and just focus on doing your business. You won’t have to make any further investment nor worry about safety and security considerations.

On top of this, the village is also a free zone which means it comes with another set of benefits such as duty free importation, zero corporate taxes, and ease of bureaucracy. In a free zone, all of your visas, customs, tariffs, and so on, are all done in the same place. This all adds to its efficiency, coupled with the fact that we have specifically designed it to operate 24/7 and have all the government agencies in the free zone. This enables companies to have a very predictable manufacturing or fabrication schedule, which is important for these industrial projects.

So someone sitting in Houston or London can predict how much they are going to spend, when they are going to spend it, and what the timelines are. Because of the environment we have created, when they do their planning for their project, they will find that they will be able to do their project in Nigeria as cheaply (or even more cheaply) than in South Korea or in other places in Europe.

Why participate?

The Growth and Employment Strategy Paper (GESP) adopted by the Cameroon Government in 2010 has as its ceterpiece a development vision by the year 2035 aimed at making “Cameroon an emerging and democratic country united in diversity”. The realisation of this vision is anchored on reaching four main objectives namely:

Reducing poverty to a socially acceptable level,

Becoming a meduim income country,

Becoming a Newly industrialised country and

Reinforcing national unity and consolidating the democratic process.

“Emerging Cameroon” will be a country embarked on a journey to sustainable economic and social development with a strong, diversified and competitive economy. The economy will be characterised by a dominant industrial sector in general and manufacturing sector in particular, with effective intergration into the global economy. Poverty will be minimal and income per head will be such that the country will be classified as a medium-income country.

In order to become a newly industrialised country, growth must be sustained on a good number of products with proper intergration of the various branches of activity by way of value chains. It will specifically be a question of significantly increasing the share of products from the manufacturing industry in the GDP and exports.

This vision consecrates a pride of place to FDIs as one of the significant components that can contribute to its realisation taking into cognizance its impact on host economies which include amongst other; job creation, the transfer of technology and human resource development.

According to the latest statistic of WIR 2014, Cameroon attracted 0.01% of F.D.I. during this period, 80% of which was concentrated in the oil sector.

It therefore becomes imperative that if Cameroon has to realise objectives stated in 2035 vision especially as to what concerns the attraction of FDI into the country, a more proactive strategy towards attracting FDI has to be engaged.

Equally serious emphasis has been laid on improving the business climate which is a condition sine-qua-non for attracting FDI coupled with the improvement of business infrastructure and the promotion of industrial load and enough energy to potential investors.

Furthermore, a more comprehensive and coordinated marketing and communication strategy has to be adopted to promote and sell the country’s economic potentials not only to foreign investors but equally to local investors in search of investment opportunities.

It is within this backdrop that the Investment Promotion Agency in collaboration with the Ministry incharge of the Economy, the Ministry of Mines, Industry and Technological Development and UNIDO are organizing the first ever Investment Promotion Forum in Cameroon under the distinguish partronage of His Excellency, President Paul Biya, President of the Republic of Cameroon.

Please note: This is an open, non-sponsored, informal networking event. There will be no presentations and you will be responsible for your own entertainment, drinks. Attending the networking event is free but we will need you to register.

You will find the participants list of our recent networking event in Amsterdam here.

8 September 2015

Turkish Ambassador to Cameroon Omer Faruk Dogan is upbeat about the future of the relations and partnership between Turkey and Cameroon in the urban development and housing domain.

He made the remarks last September 2, 2015 while paying a farewell visit to the Minister of Housing and Urban Development, Jean Claude Mbwentchou after his three-year mission in Cameroon. The Turkish Diplomat came to pledge the Turkish government's wish to continue the bilateral relationship with the government of Cameroon in terms of mass housing development.

He reiterated that the Ministry of Housing and Urban Development is important for an emerging Cameroon through the construction of low-cost houses. While noting that Turkey has one of the most important constructors in the world in terms of capacity, the Turkish diplomat believed that they can greatly contribute to realising the huge projects in Cameroon.

Veteran investor Jerome Booth, who has long extolled the virtues of emerging markets, is to launch a new investment fund that will focus on renewable and conventional energy projects in Africa.

New Sparta Asset Management plans to invest in at least three power stations, each of which will need at least £50m of equity. The group, which has a number of economists on its board, including Sunday Telegraphcolumnist Liam Halligan, is about to launch a fundraising round for investors.

"There is a huge amount of untapped opportunity in emerging markets, particularly with companies in the private, pre-IPO stage,” said Dr Booth. “Our strategy is not only to bring the funds, but also find areas where we can add value by using our expertise to help companies, and nations, grow rapidly but sustainably.”

Only a small percentage of sub-Saharan Africa has access to energy, while South Africa, one of the major economies in Africa, regularly suffers from electricity blackouts.

Many foreign investors have recently taken an interest in the continent, following years of underinvestment into Africa’s power infrastructure. Last month, Dubai-based investment firm Abraaj Group raised $375m for a fund focusing on North Africa.

A South African initiative, Project Solaris, received the Roundtable on Sustainable Biomaterials (RSB) certification this week for producing a crop that can be used as feedstock for bio jet fuel.

The energy-rich tobacco crop has been named "Solaris" and it is grown in South Africa's Limpopo province. It is a nicotine-free and GMO-free plant that yields significant amounts of sustainable oil, which could be converted into bio jet fuel.

"Project Solaris has demonstrated that it can deliver sustainability on the ground in line with the RSBs global standard," said RSB's executive director, Rolf Hogan.

"This is the result of a serious commitment to working with local stakeholders, rural development and reducing greenhouse gases while safeguarding the Limpopo's unique natural environment."

Project Solaris got RSB involved from the start to make sure the correct standards were applied from the beginning. The programme was developed and patented by Sunchem Holding, a research and development company based in Italy.

Benefits

Project Solaris has brought economic and rural development to Limpopo.

"Developing a biofuel crop in South Africa's 'breadbasket' province has, of course, drawn us into the centre of the food vs fuel debate," said Joost van Lier, the managing director of Sunchem South Africa.

"Having to undergo a systematic process of evaluating the social and environmental ramifications of this development as prescribed by the RSB has allowed us to feel confident in promoting Solaris, not only as a financially viable crop for farmers in the region, but also one that will not affect food security or lead to environmental degradation."

Sergio Tommasini, the chief executive of Sunchem Holding, added: "Thanks to all partner efforts, we earned this important certificate. RSB believed in our technology and gave us the right advice to improve it during our scale up programme."

Management Consultant Carol Musyoka examines the Regulation on Angel Investment in Turkey. Could African governments support angel investors in the same way?

In June I attended the G-20 Global Partnership for Financial Inclusion, which held a workshop on Financing Entrepreneurship Innovative Solutions in Izmir, Turkey. Turkey currently holds the G20 Presidency and therefore its government played a pivotal role in the organization of the successful workshop. One of the panelists was a well-known Turkish entrepreneur, angel investor and author – Baybars Altuntaş – who impressed the audience with his vocalization of tax incentives that the Turkish Government provides to angel investors. I pulled Baybars to the side during a coffee break and asked for more details.

Once a person has registered as an angel investor in Turkey, they are allowed to net off up to 75% of their investments in start up companies against their income tax payable in the year. In other words, a tax holiday of up to 75% of your investment! Baybars added that angel investors tend to get together and pool their funds to reduce the risks as the success rate for their investments was only typically 10%.

“Why would one invest money in start ups if only 1 in 10 initiatives succeed?” I quizzed. Baybars smiled the smug smile of the wealthy and responded: “Because the returns from that 10% will make you more money than the losses on the 90%!” I walked away, scratching my head and realizing why my risk aversion would leave me a pauper for the rest of my life.

Angel investment support in Turkey

Angel investment is the provision of financial capital to newly established or growing companies which have novel business models or technologies with high potential for growth and profit but are unable to find eligible financing resources to realize their investments.

Recognizing the inherent benefits that angel investors would provide through entrepreneurial seed capital support as well as stimulating economic growth through job and value creation, the Turkish parliament passed the “Regulation on Angel Investment” law in June 2012 and the Treasury promulgated the enabling legislation in February 2013. The rationale behind the law is to promote the financing of small enterprises and entrepreneurs by providing tax incentives to angel investors.

According to a PwC Turkey Asset Management Bulletin, in order to benefit from the tax reliefs provided in the law business angels first have to obtain a license from the Treasury. The business angel cannot directly or indirectly be a controlling shareholder of the qualifying company that it wishes to invest in, neither can the qualifying company belong to his relatives. A qualifying company should, amongst other criteria, be a registered company in accordance to Turkish company law with a maximum of 50 employees and net assets of not more than TRY 10 million (Kshs 354 million).

If the business angels participate in qualifying companies whose projects are related to research, development and innovations then the applicable tax incentive is 100% instead of 75%. This is where it gets interesting. In order to get 100% tax relief those activities have to have been supported in the last five years by the Scientific and Technological Research Council of Turkey, Small and Medium Enterprises Development Organization and the Ministry of Science, Industry and Technology.

The tax reliefs are applicable until the 31st of December 2017 making it a 5-year program, but the Cabinet can authorize the extension of the date by another five years. Shares acquired by the angel investor have to be held for at least two years and the minimum investment is TRY 20,000 (approximately Kes 700,000) and a maximum of TRY 1,000,000 (Kes 35 million) annually.

Angel investment support in Kenya?

So let’s bring this concept home. Imagine if the Kenyan government picked four key economic areas that they wanted to drive with the help of the private sector. Let’s say agriculture, health, technology and education. Then the government wakes up to the fact that they can’t be all things to all people, and that they need to leave the business of business to the best people suited to do it: businesspeople.

They then assume that it’s far better to allow a business person to take a risk on an entrepreneur, as the business person has 1) a much better nose for sniffing out and recognizing good opportunities, 2) years of experience in making and losing money, therefore an appreciation for and recognition of risk, 3) business experience – the kind of which they don’t teach in business school – leading to mentorship, and 4) his/her very own money, which defines their skin in the game.

11 August 2015

(Business in Cameroon) - The downturn in global oil prices on the international market and the security challenges at the borders with the Central African Republic and Nigeria, which are slowing the performance of the tax and customs administrations, did not seem to affect the Treasury Department. Indeed, in the first six months of 2015, the government was able to raise 1.2 trillion FCFA in revenue, surpassing initial forecasts by 100 billion FCFA, according to Ministry of Finance statistics.

“Cameroon has the advantage of being a country with a diversified economy. Although oil is a part of our budget, it represents around 20% of our revenue. This allows us to say that, with 80% of revenue from domestic taxes, Cameroon is able to face external issues,” explained the Cameroonian Finance Minister, Alamine Ousmane Mey (photo), in the margins of the last board meeting of Banque des Etats de l’Afrique centrale (BEAC).

(Business in Cameroon) - Kone Dossongui, Ivorian head of Atlantique (Atlantic Télécom, Atlantic Financial Group) already present in Cameroon through the bank of the same name, was received on July 29, 2015 in Yaoundé, by the Cameroonian Minister of Economy. The Ivorian businessman came to present to Minister Nganou Djoumessi the progress of his plan to create a cocoa consortium in Cameroon.

It is an agro-industrial project in three parts, including the creation of cocoa farms in the country, the construction of a cocoa processing plant and the setting up of a producers’ association.

The project has been so well received by the Cameroonian authorities that it falls in with plans to revive the cocoa-coffee sector, adopted by the Cameroonian government in September 2014. Implemented at the start of 2015, the plan aims to produce 600,000 tonnes nationally by 2020 against the current annual average of 200,000 tonnes.

The value of Africa’s pharmaceutical industry jumped to $20.8bn in 2013 from just $4.7bn a decade earlier. That growth is continuing at a rapid pace: we predict the market will be worth $40bn to $65bn by 2020.

That’s good news for multinationals and pharmaceutical companies seeking new sources of growth as developed markets stagnate. It’s also good news for patients, who have gained access to medicines previously unavailable on the continent. Yet it isn’t enough to know where the industry’s next growth engine can be found. Leaders must also understand what is driving growth, what challenges they are likely to face, and how to collaboratively work with health systems to win in this complex environment.

What’s driving growth

Africa’s pharmaceutical markets are growing in every sector. Between 2013 and 2020, prescription drugs are forecast to grow at a compound annual growth rate of 6%, generics at 9%, over-the-counter medicines at 6%, and medical devices at 11%. Three factors are driving this growth:

Urbanisation. Africa’s population is undergoing a massive shift. By 2025, two-fifths of economic growth will come from 30 cities of two million people or more; 22 of these cities will have GDP in excess of $20bn. Cities enjoy better logistics infrastructures and healthcare capabilities, and urban households have more purchasing power and are quicker to adopt modern medicines.

Healthcare capacity. Between 2005 and 2012, Africa added 70,000 new hospital beds, 16,000 doctors, and 60,000 nurses. Healthcare provision is becoming more efficient through initiatives such as Mozambique’s switch to specialist nurse anesthetists and South Africa’s use of nurses to initiate antiretroviral drug therapy. The introduction of innovative delivery models is increasing capacity still further.

The business environment. To create a more supportive environment for business, governments have introduced price controls and import restrictions to encourage domestic drug manufacture; required country-specific labeling to reduce counterfeiting and parallel imports; and tightened laws on import, wholesale, and retail margins. In the pharma industry, meanwhile, pharmacy chains are consolidating, horizontal and vertical integration is on the rise, and manufacturing is expanding. A flurry of mergers and acquisitions, joint ventures, strategic alliances, partnerships, and private-equity deals are further extending Africa’s markets.

10 August 2015

For many African women, the opportunities for becoming an entrepreneur and growing formal businesses are even scarcer than for their male counterparts.

Women typically struggle more with accessing loans from banks and other financial institutions in many African countries, and are often not given the same opportunities in education due to beliefs around traditional roles of men and women. For many low-income families, when given the choice to send either the son or daughter to school, the son is typically given preference.

This year, only 27% of applicants for the Anzisha Prize were women. However, one country stands out – Rwanda. While its small population meant overall number of applications from the country was only a fraction of Nigeria’s, what was interesting is that close to 60% of applicants were women.

This seems to represent the country’s overall focus around women empowerment. After Rwanda’s genocide in 1994, women made up 70% of the population, and President Paul Kagame has since introduced a number of initiatives to support women in business, education and politics. In fact, Rwanda has caught the attention of international media over the years for being the only country in the world to have more women members of parliament than men.

“It is exciting to see Rwanda take such progressive steps. Women empowerment has considerable benefits for any economy’s growth and development, and we hope that other African countries follow Rwanda’s example,” says Grace Kalisha, senior programmes manager at the African Leadership Academy.

In celebration of Rwanda’s impressive proportion of women applicants, The Anzisha Prize has highlighted some of these entrepreneurs below.

IMPORTANT NOTE: Finalists for the Anzisha Prize, Africa’s premier award for its youngest entrepreneurs, have not yet been announced. The entrepreneurs profiled below have been selected randomly, and are not necessarily winners.